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TMI Blog2022 (7) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... is capital of INR 3,02,33,407/- and secured loans from bank as reflected in Balance Sheet of Lakshmi Business Centre, proprietorship firm of AMR - Further, as per the computation of income for the Assessment Year 2013-14, AMR had net taxable income - The aforesaid information and supporting documents were filed during the assessment proceedings. The PCIT had, relying upon incorrect facts, proceeded to conclude that the AO had failed to carry out necessary reconciliation of bank loan with its utilization. Accordingly, in view of the aforesaid, we set aside the decision of the PCIT on this issue. Share application money received by the Appellant from WEPL - We find that on the examining of the bank statements submitted by the Appellant, the PCIT had pointed out that there were deposits/fund transfers immediately prior to transfer of funds to the Appellant as share application money and referred to one such instance of fund transfer from of INR 36,00,000/- credited to the account of the Appellant on 27.07.2012 in paragraph 3.3 of the impugned order. Perusal of the bank statements shows that the observations of PCIT are factually correct as there were deposit/fund transfers (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT ] under Section 263 of the Income Tax Act, 1961 [hereinafter referred to as the Act ] setting aside the Assessment Order, dated 29.03.2016, passed under section 143(3) of the Act. 2. The appeal was dismissed as being barred by limitation vide order dated 29.11.2019, whereby the application filed by the Appellant seeking condonation of delay of 191 days in filing the present appeal was rejected. However, the said order was recalled vide order dated 19.03.2020 passed in MA No. 621/M/2019. In paragraph 5 of the aforesaid order, the Tribunal noted as under: 5. We have heard both the parties and perused the contents of miscellaneous application filed by the assessee, in light of the decision of the Tribunal, dated 29/11/2019 in ITA No.7115/Mum/2018 and we find that the Tribunal has dismissed appeal filed by the assesee by not condoning the delay of 191 days in filing the appeal for the reasons stated in its order dated 29/11/2019. On going through, the reasons given by the Tribunal for rejection of the claim of the assessee for condonation of delay and the pleadings taken by the assessee in its miscellaneous application, we find that although, the Tribunal has accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 is illegal and bad in law. 2. The Ld. Pr. CIT has erred in law and on facts in holding that the order dated 29.03.2016 passed u/s. 143(3) of the Act by the Assessing Officer was erroneous and prejudicial to the interests of the revenue. 3. The Ld. Pr. CIT has erred in law and on facts in holding that the order passed u/s. 143(3) of the Act allowing deduction u/s. 57 of the Act in respect of interest expenditure of INR14,22,847/- was erroneous and prejudicial to the interests of the revenue. 4. The Ld. Pr. CIT has erred in law and on facts in setting aside the order passed u/s. 143(3) of the Act and in directing the Assessing Officer to pass a fresh order with respect to the following issues: (i) share application money of INR 7,25,52,000/- received from Shri Amrit Rajani; and (ii) share application money of INR 8,51,17,856/-. received from M/s. Whiz Enterprises Pvt. Ltd. 5. The Id. Pr. CIT ought to have appreciated that the Assessing Officer had already examined the aforesaid issues and it was after judiciously considering the subject-matters that a decision thereon was taken. 5. The brief facts of the case are that the Appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer had failed to carry over necessary reconciliation/verification. The amendment made to Section 68 by the Finance Act, 2012 which was applicable from Assessment Year 2013-14, was ignored by the Assessing Officer as he had failed to verify the genuineness of the source of source of this application money. 8. In response to the show-cause notice, the Appellant filed written submission vide letter dated 27.02.2018 and requested that the proceedings under Section 263 of the Act be dropped. However, the PCIT, vide order dated 28.03.2018, concluded that the Assessment Order, dated 29.02.2016, was erroneous and prejudicial to the interest of the Revenue and exercising powers of revision under Section 263 of the Act read with Clause (a) of Explanation 2 to Section 263 of the Act set aside the Assessment Order, dated 29.02.2016, with the directions to the Assessing Officer to adjudicate upon the issues afresh after giving the Appellant reasonable opportunity of being heard. The relevant extract of the aforesaid order of PCIT containing findings on three issues and the directions are as follows: Issue No.1 2.3 On verification of assessment records, it is see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation certificate and reconcile the same. Issue No.3 3.3 Similarly, a sum of Rs. 8,51,17,856/- has been invested by M/s Whiz Enterprises Pvt. Ltd. in the assessee company as share application money. On going through the financial statements of M/s Whiz Enterprises Pvt. Ltd. it is noticed that the said company has declared income of only Rs. 77,93,978/- in A.Y. 2013-14 and had a Authorized capital of meager Rs. 1,00,000/-. Analysis of the Bank statements of M/s Whiz Enterprises Pvt. Ltd. shows immediate deposits before transfer of funds to the assessee company but does not throw any light on the source of funds of the subscriber company. For instance, on 27.07.2012 there is a credit of Rs. 3,600,000/- in the account of M/s Whiz Enterprise Pvt. Ltd. and on the very same day an amount of Rs. 3,600,000/- has been transferred to M/s Anika Universal Pvt. Ltd. and it had been a regular practice that whenever there is transfer to M/s Anika Universal P. Ltd. there is immediate credit before the said transaction. Thus the AO has failed to verify the source of money introduced by M/s Whiz Enterprises Pvt. Ltd. in the light of amendment to Section 68 of the I.T. Act wherein the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter referred to as AMR ) and Whiz Enterprises Pvt Ltd (hereinafter referred to as WEPL ), respectively. However, the PCIT has incorrectly taken the total amount of share application money received by the Appellant as on 31.03.2013 as the basis to proceed against the Appellant. The date-wise details of the share application money received and share application money ledgers were filed during the assessment proceedings which clearly being out that 7,25,52,000/- and 8,51,17,856/- was closing balance of the share application money account pertaining to AMR and WEPL, respectively. Further, while concluding that the that the AO has failed to verify the pertaining share application money received from AMR, the PCIT has incorrectly relied upon the figures of INR 3,06,24,932/-, being share application money as reflected Schedule H-Loans And Advances forming part of annual accounts of Lakshmi Business Centre, Sole Proprietorship firm of AMR. Referring to the Letter, dated 01.03.2016, filed during the assessment proceedings, Ld. Authorized Representative submitted that the share application money was received during the relevant previous year from AMR and WEPL, existing shareholders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the provisions of Section 68 of the Act. Appellant has filed its own bank statement, as well bank statement of WEPL. Similarly, regards share application money received from AMR, the appellant has filed the computation of income, and annual accounts of Lakshmi Business Centre, proprietorship firm of AMR. 13. We have given a thoughtful consideration to the rival contentions and have perused the material on record. The PCIT has exercised powers under Section 263 of the Act as he was of the view that the assessment order is erroneous to the extent it is prejudicial to the interest of revenue in terms of Section 263 of the Act on the basis of 3 issues. 12.1. Issue No.1 pertains to the claim of deduction for interest expenditure of INR 14,22,847/- made by the Appellant and allowed by the AO under Section 57 of the Act. On perusal of records it is clear that sufficient inquiry/verification was conducted by the AO during the assessment proceedings. Specific query in relation to claim of deduction were raised in the notice, dated 28.01.2016, issued under Section 142(1) of the Act. The AO had asked for justification of claim for deduction under Section 57 of the Act, details/brea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected in Balance Sheet of Lakshmi Business Centre, proprietorship firm of AMR (at page 90 of paper-book). Further, as per the computation of income for the Assessment Year 2013-14, AMR had net taxable income of INR 42,12,652/-. The aforesaid information and supporting documents were filed during the assessment proceedings. The PCIT had, relying upon incorrect facts, proceeded to conclude that the AO had failed to carry out necessary reconciliation of bank loan with its utilization. Accordingly, in view of the aforesaid, we set aside the decision of the PCIT on this issue. 12.3. Issue No. 3 pertains to share application money of INR 2,56,64,000/- received by the Appellant from WEPL. We note that the reply, dated 27.02.2018, filed in response to the show-cause notice, dated 19.02.2018, issued by PCIT provides no explanation about the source of funds used by WEPL to make payment towards share application money of INR 2,56,64,000/- to the Appellant. The Learned Authorised Representative of the Appellant vehemently argued that the Appellant had filed relevant extracts of the bank statements of WEPL during the assessment proceedings and therefore, had complied with requirements of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. Further, at the relevant time AMR held 46% shareholding of the Appellant, whereas balance 54% shareholding was held by WEPL. As per annual accounts of WEPL filed by the Appellant, AMR was also one of the directors of WEPL. Therefore, the Appellant was in a position to gather information and provide explanation about the nature and source of funds used by WEPL for making payment towards share application money. We are of the view that neither the assessment order nor the material on record supports the contentions of the Appellant the AO had carried out necessary inquiries and verification during the assessment proceedings, and therefore, the provisions of Explanation 2(a) to Section 263 are attracted. The decision of Tribunal in the case of Sir Dorabji Tata Trust Vs DCIT (ITA No. 3909/Mum/2019) on which reliance has been placed by the Authorised Representative of the Appellant, therefore, does not advance the case of the Appellant as the case of the Appellant falls in the category of third possibility as explained in Paragraph 22 of the said decision of the Tribunal, the relevant extract of which reads as under: 22. Having said that, we may also add that while in a sit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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